October 02, 2006

Leveraging the Wisdom of Communities to Help in Intellectual Property Reform

Last week IBM announced a new worldwide policy governing the creation and management of patents. Our new IP policy is based on four key tenets:

Patent applicants are responsible for the quality and clarity of their patent applications.

Patent applications should be available for public examination.

Patent ownership should be transparent and easily discernible.

Pure business methods without technical merit should not be patentable.

The details of our announcement have been well covered in a number of good press articles, such as this one and this one. So, I’d like to focus this blog entry on the process that led us to this IP policy, and in particular, how we leveraged the wisdom of expert communities to help us arrive at the decision to make the announcement, as well as the actual content of the policy. I think that this represents a very interesting example of how companies like IBM need increasingly to manage their key strategies, especially those with important societal implications.

Let me start by giving my personal opinion as to why we established this new policy. The answer is simple but subtle. In short, it is in the best interests of societies around the world, including the companies that do business in them, that intellectual property be managed in a way that enables the knowledge economy to reach its full potential. If you want your company to not only survive but thrive in the long run, it is very important to act in the best interests of society.

IP in general and patents in particular are playing a very prominent role in our emerging 21st century knowledge economy. Increasingly, the innovations driving the economy are products of the mind the economic value of which is captured and legally protected in the form of patents. As IBM Chairman and CEO Sam Palmisano observed in a recent opinion piece: "More and more of the innovation that truly matters today functions not only as intellectual property (the brilliant work of individuals), but as intellectual capital (a deep well of knowledge created collaboratively)."

Over the last 25 years, the volume of patent applications has significantly increased, overwhelming patent systems around the world. Overburdened patent systems have given rise to significant legal and business uncertainties, including the dubious quality of many of the ideas being granted patents. If the quality of the invention covered in a patent is low - that is, neither significant nor new – it leads to patent infringement disputes of questionable merit and may seriously erode trust in our IP laws and institutions. Patent examiners need our help in evaluating the growing volume of applications, so we can help improve the overall patent systems, and in particular, the quality of patents.

Just about every major panel examining innovation and competitiveness has called for a serious effort to reform the patent system. That includes IBM's own Global Innovation Outlook (GIO), both GIO 1.0 conducted in 2004 and GIO 2.0 whose recommendations came out earlier this year. The GIO is based on a series of meetings around the world that bring together leaders in IBM’s technical and business communities along with thought leaders from academia, government, companies of all sizes, public interest groups, the venture capital community and other key constituencies to collectively peer into the future and identify major trends, insights and opportunities.

One powerful idea from GIO 2.0, which included close to 250 thought leaders from 33 countries and 178 organizations, was that IBM should take the lead in organizing an initiative to propose principles for a single, global intellectual property marketplace that would reflect the realities of 21st century collaborative innovation and business. They asked us to do so by inviting IP leaders from around the world to collaboratively develop a set of IP marketplace principles using a wiki, - a new social networking tool that enables documents to be collaboratively written and rewritten through a common web site.

Following up on the GIO recommendation, IBM assembled a worldwide community of around 50 legal, economic and technology experts from academia, industry and government. Using the online wiki, these experts collaborated with each other and with IP leaders in IBM to determine the key characteristics of a properly functioning IP marketplace. Over a two month period this past spring, they debated some of the most significant challenges surrounding IP - sometimes reaching consensus and sometimes agreeing to disagree.

The result of the project is a collaboratively written document Building a New IP Marketplace, which aims to establish the foundation for a functioning marketplace for the creation, ownership, licensing and equitable exchange of intellectual property. The IP marketplace document is organized around five key areas: patent quality; patent ownership transparency; integrity of IP market participants; patent values based on marketplace dynamics; and flexibility to support different forms of innovation.

The IP policy we announced last week was very much inspired by this IP Marketplace document. The IP leaders that participated in the wiki-based discussions agreed that private industry should do more than just wait for patent offices to fix the application process or for the courts to rule or for Congress to legislate, and encouraged us to lead by example. We hope that this IP policy will be a model for others to follow. We believe that, if widely adopted, it could help significantly improve patent quality and curb the rising number of patent disputes and litigation.

A properly functioning intellectual property marketplace, - including the patent reform that underlies it - is a shared, community responsibility. We should all participate in its development and successful evolution.

I would like to understand the correlation between Number of Patents filed by a Company and Significant Innovations produced from these Patents. I define a Significant Innovation as new, commercially released, has created a market of at least over $100 million (either by the original Patent maker or competitor), and has importantly caused imitations. I furher believe that companies should protect Significant Innovations and not necessarily every Patent that has been filed.